This week rate markets will focus on the Fed, coronavirus, and jobs numbers

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Published Date 5/4/2020

This Week's Mortgage Rate Summary

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up.

Rates Currently Trending: Neutral

Mortgage rates are trending sideways to slightly higher so far today. Last week the MBS market improved by +10bps. This caused rates to move sideways for the week. We saw low rate volatility throughout the week.

This Week's Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to impact rates this week: 1) Coronavirus, 2) The Fed, and 3) Jobs.

1) Coronavirus: The headlines will continue to drive pricing once again as economists try to handicap just how bad and how long the recession will be. In focus this week are the states reopening, U.S. vs. China on trade and release of the Wuhan Covid-19 report as well as continued infection and spread rates.

2) The Fed: Their purchase schedule of MBS, primarily the Agency 2.5 and 3.0 coupons, continues to be one of the major driving forces mortgage rates. Their concentration of purchases continues to decline and will be even lower this week for those two specific coupons. They are purchasing other coupons as well, 15 year, GNMA, FNMA 3.5, etc.

This week's speaking schedule:

05/05 Charles Evans, James Bullard, and Raphael Bostic
05/06 Raphael Bostic
05/07 Patrick Harker

3) Jobs: This week has a ton of jobs data with ADP Private Payrolls, Weekly Jobless Claims, Challenger Job Cuts, Non-Farm Payrolls, Unemployment Rate, Average Hourly Earnings, and more. Usually, the focus on the Jobs report is on wages (due to inflationary concerns), but this week it will be on the Unemployment Rate.

This Week's Potential Volatility: Average

We have seen very little rate volatility over the last few weeks. However, this week could be different. We have a ton of jobs data that can move the markets. Of course, the coronavirus will be a primary focus as it has been as of late.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Source: TBWS

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.